Industrial Distributor

The Challenge

A technical components distributor with 8,000+ SKUs had pricing chaos:

• Patchwork of cost-plus, competitor-matching, and forgotten prices
• Sales team had broad discounting authority → margin erosion
• 60% of SKUs sold <50 units/year (sparse data)
• Sales culture resistant to “black box” pricing

The Approach

Developed a hierarchical pricing model that works despite data sparsity:

• Category-level estimation: Shrink SKU estimates toward category priors
• Customer segmentation: Price-sensitive vs. relationship accounts
• WTP signals: Quote-to-order rates, discount request frequency
• Transparent outputs: Confidence intervals + plain-language explanations

The Outcome

After 12 months:

Key Insight

B2B pricing isn’t about finding the “right” price — it’s about giving sales teams defensible anchors.